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CLEARING    HOUSE    LOAN 
CERTIFICATES 

AND  SUBSTITUTES  FOR  MONEY 

USED    DURING    THE    PANIC    OF    1907 


BY 


JAMES    G.   CANNON 


VICE-PRESIDENT  OF   THE  FOURTH   NATIONAL   BANK 
OF  THE  CITY  OF  NEW   YORK 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

Microsoft  Corporation 


http://www.archive.org/details/clearinghouseloaOOcannrich 


Clearing  House  Loan  Certificates 
and  substitutes  for  money 

USED    DURING    THE    PANIC    OF    1907 


WITH   SUGGESTIONS   FOR   AN   EMERGENCY  CURRENCY 
BASED   UPON   SUCH    LOAN   CERTIFICATES 


BY 
JAMES    G.   CANNON 


•••  •      .  !     ••    • 
.•**••••** 


DELIVERED    BEFORE 

THE   FINANCE   FORUM 
New  York  City 

March  30.  1910 


*$ 


THE  TROW  PRESS 
NEW  YORK 


Clearing  House  Loan  Certificates 

1907 


Mr.  Chairman  and  Gentlemen: 

I  am  to  speak  to  you  this  evening  on  the  subject, 
"  Clearing  House  Loan  Certificates  and  Substitutes  for 
Money  Used  during  the  Panic  of  1907." 

The  Panic  of  1907  differed,  as  every  panic  does,  from 
its  predecessors,  and  one  of  its  most  notable  characteris- 
tics was  the  sharp,  quick  and  decisive  clogging  of  Inland' 
Exchange.  This  condition  of  affairs  was  more  pronounced 
during  the  late  panic  than  in  any  of  the  previous  disturb- 
ances, because  of  the  growth  of  our  industries  and  the 
changing  mercantile  conditions  which  compelled  large  and 
constant  remittances  to  our  central  reserve  cities.  A 
study  of  panics  shows  that  they  generally  result  from 
overtrading  and  inflation,  which  are  checked  by  some  un- 
toward circumstance,  such  as  the  failure  of  an  important 
bank  or  banking  institution  in  one  of  the  large  money 
centres,  notably  in  New  York,  and  the  distrust  thus  cre- 
ated in  the  minds  of  the  people  breaks  the  bubble  of  infla- 
tion. The  panicky  condition  thus  brought  about  is  not 
immediately  felt  throughout  the  country,  but  its  ripples 
gradually  spread  like  those  caused  by  the  dropping  of  a 
pebble  in  water. 

In  1907,  the  bankers  of  the  country,  having  had  experi- 
ence in  previous  panics,  recognized  what  was  coming,  and 
took  immediate  steps  through  their  respective  Clearing 
House  Associations  to  ward  off  the  detrimental  effects  of 
the  financial  disturbance  in  this  City;  hence  there  sprang 
into  existence,  within  forty-eight  hours,  through  these 
sources,  a  large  volume  of  Clearing  House  Certificates. 
Because  these  Loan  Certificates  were  not  interchangeable, 
and  were  in  only  a  very  few  instances  received  on  deposit 
by  banks  outside  of  the  immediate  city  or  vicinity  where 
issued,  the  operations  of  the  banking  interests  of  each  lo- 


241228 


Clearing  House  Loan  Certificates 

cality  were  confined  almost  exclusively  to  itself,  thus  clog- 
ging Inland  Exchange  and  preventing  the  free  circula- 
tion of  the  credits  of  the  country  through  the  drafts  that 
are  usually  drawn  by  one  money  centre  upon  another. 
Clearing  House  Loan  Certificates,  therefore,  filled  a  more 
important  place  in  the  panic  of  1907  than  in  any  previous 
panic  in  which  they  had  been  used  in  this  country,  and  it 
seems  to  me  that  by  studying  to  some  extent  the  condi- 
tions under  which  they  were  issued,  we  can  gather  many 
useful  lessons  in  finance,  and  perhaps  can  point  the  way 
to  a  solution  of  some  of  our  currency  problems. 

Clearing  House  Loan  Certificates  are  instruments 
which  represent  temporary  loans  made  by  the  banks 
banded  together  as  a  Clearing  House  Association,  to  the 
individual  members  of  such  association,  upon  collateral 
acceptable  to  a  Committee  of  bankers  appointed  for  the 
purpose  of  passing  on  and  holding  such  collateral.  The  w 
certificates  bear  a  stated  rate  of  interest,  and  are  available 
to  the  banks  only  for  use  in  settling  balances  due  to  the 
other  members  of  the  same  association.  As  Clearing 
House  balances  are  normally  payable  in  cash,  these  certifi- 
cates render  available  for  other  purposes  an  amount  of 
cash  equal  to  the  total  of  certificates  issued. 

Clearing  House  Loan  Certificates  were  first  issued  in  * 
this  country  in  1860.  From  that  time  until  the  panic  of 
1893,  their  use  had  been  strictly  confined  to  the  settlement 
of  balances  between  the  banks.  In  a  few  instances,  how- 
ever, in  the  South,  during  the  panic  of  1893,  and  to  a  con- 
siderably greater  and  more  general  extent  in  the  recent 
disturbance  through  which  we  have  passed,  instruments 
known  variously  as  Cashiers'  Checks,  Clearing  House 
Checks,  Clearing  House  Scrip  and  Certificates  of  In- 
debtedness, specimens  of  all  of  which  I  will  show  you, 
were  issued  and  circulated  freely  as  money  in  the  com- 
munities in  which  they  were  made  available.  Some  of 
these  instruments  were  issued  in  such  a  way  as  to  circum- 
vent any  existing  legislation  on  the  subject,  while  others 
could  undoubtedly  have  been  justly  subjected  to  a  tax,  but 
taking  into  consideration  the  exigencies  under  which  they 

[Page  4] 


Clearing  House  Loan  Certificates 

were  issued,  and  the  further  fact  of  their  immediate  re- 
tirement as  soon  as  the  conditions  which  had  called  them 
forth  had  passed,  I  believe  no  right  thinking  man  would 
condemn  either  the  purpose  or  the  act. 

The  Charter  of  the  Bank  of  England  directs  that  no 
currency  shall  be  issued  except  upon  the  deposit  of  a  like 
amount  of  gold  coin  with  the  Issue  Department,  and  yet 
upon  three  occasions  in  its  history,  conditions  have  been 
deemed  sufficiently  critical  by  its  Governors  to  cause  them 
to  temporarily  disregard  that  provision  of  the  Charter, 
and  issue  enough  currency,  secured  by  other  available 
collateral,  to  meet  the  immediate  requirements  of  business. 
This  currency  was  in  each  instance  retired  as  soon  as  con- 
ditions again  became  normal,  and  it  may  be  added  that  on 
all  three  occasions  the  consent  of  Parliament  to  this  ac- 
tion was  subsequently  obtained.  So  it  will  be  seen  that 
under  certain  circumstances,  in  England,  as  well  as  in  this 
country,  the  disregard  of  established  customs  has  been 
deemed  justifiable.  Personally,  I  believe  that  any  form 
of  currency  issued  in  a  time  of  financial  stress,  under 
Clearing  House  supervision,  properly  safeguarded  to  in- 
sure its  redemption  at  its  face  value  when  the  necessity  for 
it  has  ceased  to  exist,  should  be  recognized  as  a  valuable 
possibility,  and  should  not  be  subjected  to  adverse 
criticism. 

During  the  few  months  immediately  subsequent  to  the 
panic  of  1907,  I  obtained  from  every  Clearing  House  in 
this  country,  specimens  of  the  various  temporary  instru- 
ments issued  by  them  to  relieve  their  local  situations,  as 
well  as  copies  of  the  resolutions  under  which  they  were 
issued  and  all  the  facts  in  connection  therewith,  including 
the  date  of  issue,  the  length  of  time  they  were  used,  the 
aggregate  amount  put  out  and  the  maximum  amount  out- 
standing at  any  one  time.  From  these  certificates,  I  have 
selected  such  as  seem  to  contain  unusual  or  distinguishing 
features  and  have  had  lantern  slides  made  from  them, 
which  I  now  propose  to  show  you,  pointing  out  these  dif- 
ferent features  as  we  go  along: 

[Page  5] 


Clearing  House  Loan  Certificates 


New  York  City 

I  shall  first  show  you  a  copy  of  the  Loan  Certificate 
issued  by  the  New  York  Clearing  House  Association,  as 
most  of  the  Certificates  (as  distinguished  from  checks) 
very  closely  resemble  this,  and  in  the  larger  centres,  in 
many  instances,  they  were  identical. 

I  might  state  in  this  connection  that  in  the  aggregate 
$101,000,000  of  these  certificates  were  issued  during  the 
panic.  The  date  of  the  first  issue  was  October  26th,  1907 ; 
the  date  of  the  first  cancellation  was  November  14th,  1907*; 
the  date  of  the  final  issue  was  January  30th,  1908,  and 
the  date  of  the  final  cancellation  was  March  28th,  1908. 

The  greatest  amount  of  these  certificates  issued  to  any 
one  bank  was  $17,000,000,  and  the  smallest  $250,000. 

The  time  elapsed  from  the  first  issue  to  the  final  cancel- 
lation was  22  weeks,  or  154  days. 


Augusta,  Ga. 

Issued  in  denominations  of  $1,  $5,  $10  and  $20. 
Secured  by  collateral  50%  in  excess  of  the  amount 
issued.  Meeting  held  Nov.  2nd,  1907,  authorized  the 
banks  to  give  their  notes  to  three  appointed  Trustees,  due 
July  1st,  1908,  secured  by  collateral  as  above,  payable  at 
any  time  in  the  interim  with  Clearing  House  Certificates 
or  lawful  money.  Payment  of  each  check  guaranteed  on 
back  by  the  banks  composing  the  Clearing  House  Asso- 
ciation.    $5  certificate  shown. 


Baltimore,  Md. 

To  be  issued  up  to  75%  of  the  collateral  deposited  and 
to  no  bank  in  excess  of  30%  of  its  capital.  The 
smallest  percentage  of  certificates  to  capital  that  has  come 
to  my  attention.     $10,000  certificate  shown. 

[Page  6] 


ivo.  50393 


Loan  Committee  of  the  New  York  Clearing  House  Association. 


2Vew   York, 


This  Certifies,  Uvat  the- 


has  deposited,  -with  this  CoTn.Tn.Utee,  securities  in.  accordance  -with  the  proceedings  of 
Meeting  of  the  Association,  held  October  86th,  1907  upon  -which  this  Certificate  is 
issued.  This  Certificate  Trill  be  received  in  payment  of  balances  at  the  Clearing  ttou.se 
for  the  sum  of  FIFTY  THOUSAND  DOLLARS,  from  any  Member  of  the  Clearing 
House  Association. 


On  the  surrender  of  this  Certificate  by  the  dej 
above  named,  the  Committee  will  endorse  the  ami 
the  obligation  of  said  Bank,  held  by  them ,  i 
tionate  share  of  the  collateral  securities  held  therefor. 


$60,000. 


r„ 


Nft.  85498 

SERIES  A. 


Augusta  Clearing  House 
Association  Certificate 


AUGUSTA,  GA. 


AnlS^J^rtlheS  that  the  Banks  composing  the  Augusta  Clearing  House  Association 
hare  degpsitejl  with  A.  S.  Hatch,  P.  S.  North  and  Wm.  Sch 


Association,  Securities  to 
the  payment  of  the  sum 


ert.    Trustees  of  said  Clearing   House 
TS  to  secure  to  the  bearer  hereof 


In  lawful  oyyie)'  of  the  Utfltefl  StatasTpa. 
ia  issoed1»4v.ordance  with  the  proceedings  of  a'mecfinfl  o 
of  November,  J907,  and  will  be  received  on  deposit 
House.    .*         • 


lation,   held   on  the  S 
or  in  yeytncpi  pf  jlebt*  doe, any  ^V^jn  aald  Clearing 


certificate 

Second  day 


That  the 
'xecutivc  Committee  of  this 
rjtroccedings  of  a    meeting  of  t 
'upon  which  this  certificate  is  issuer/. 
Vyment  of  balances  at   the  Clearing  House 
liars  from  any  member  of  the  Clearing  House 


Jfouse,  securities,  in 
wing   House   lveld 
dip  cat  e  mill  be 
of  Ten 
render  of 
*ate  by  the  depositing  bank  above  named,  the  eonnniifS^fh^lfjjudorse 
hint  as  a  payment  on  the  obligations  of  said  bank  held  Ufl&Mnnkand 


nidcr  a  proportionate  share  of  collateral  securities  held  therefor 


$10,000 


CELLED 


«s 


a 

5 

R 

.1 


No. ZQ.Q. Loan  Committee  of  the  $COOO. 

Buffalo  Clearing  House  Association 

^^£A     ^  &, : /**_ 

vTbtd  Certifies  that  there  have  been  deposited  with  this  committee  securities  in 
accordance  with  the  proceedings  of  a  Meeting  of  the  Association  held  October  20th,  1907, 
upon  which  this  Certificate  is  issued.  This  Certificate  will  be  received  in  payment  of  balances 
at  the  Clearing  House  for  the  sum  of  Five  Thousand  Dollars  from  any  Member  of  the 
Clearing  House  Association. 


On  the  surrender  of  this  Certificate  by  the  Depositing 
Bank  the  Committee  will  endorse  the  amount  as  a  payment 
on  the  obliea/tonO>f  saia*£ank  /ml J  byffhqp,  and  surrender 
a  proportionate  &hare*  9f  ihemcollateal  securities  held 
therefor.    *  '   *    - 


•*$50<Jo.  J 


O          3           O 

$5-00                 ;••••••          Canton,  Ohio, 

•  •    •• 

YES: 
in  payment 
men,   and 
;or  payment  t 

)SETHISC 
ARER. 

THE  Clfi-^ATfoNAL  BANK 

,CANTOJj;^)HIO 

EM  PLC 

received 

busines 

r  banks 

se. 

'TOL( 

TO  BE 

Pay  to  the  bearer,  throughYth/'GANTGN  CLEARING  HOUSE  only, 

n     *  c  B  -r   a  > 

FIVJ&BOLLARS 

T< 

Thii  check  - 

bills   by   mercha 
deposited  by  the 
the  Canton  Clea 
BE  CAREF 
AS  IT  IS  PA\ 

••••    • 

1 


$  1  .00  Canton-  °hio'  November  1 1 ,  1 907. 

PAY  TO  THE  BEARER 

ONE  DOLLAR^QjSTE    DOLLAB-*100 

PAYABLE  ONLY  THROUGH  THE  CANTON  CLEARING  HOUSE. 

•••     •       '    !*• 

Z  JMS'RlRsSr  NATIONAL  BANK, 


•    •    * 


•       •  •  • 


•    .*••  •  •   •      — c^r~ 

•  •  •  •  * 


Clearing  House  Loan  Certificates 


Buffalo,  N.  Y. 

In  form  practically  the  same  as  at  New  York.  This 
differs  from  other  issues  only  in  the  omission  of  the  name 
of  the  bank  to  which  they  were  issued,  the  identity  of  the 
certificate  with  the  collateral  being  preserved  by  means  of 
the  certificate  numbers,  a  record  of  which  was  confiden- 
tially kept  at  the  Clearing  House.  By  this  means  no  at- 
tention was  drawn  to  the  banks  which  found  it  necessary 
to  use  them* 


Canton,  Ohio 

Canton  is  a  centre  of  manufacturing  interests  of  con- 
siderable magnitude,  and,  therefore,  required  large 
amounts  of  cash  for  pay  rolls  which  was  not  available.  A 
consultation  was  held  between  the  banks  and  their  manu- 
facturing clients  with  the  result  that  pay  checks  were 
agreed  upon.  One  general  form  was  used,  as  shown  on 
the  screen,  in  three  denominations,  $5,  $10  and  $20,  and 
each  bank  provided  its  customers  with  a  supply  of  these. 
The  checks  were  made  payable  to  "  Bearer  "  through  the 
Canton  Clearing  House  Association  only  and  had  to  be 
signed  by  an  authorized  person  connected  with  the  firm 
or  corporation  issuing  them.  These  checks,  however, 
were  found  unsatisfactory,  partly  from  the  fact  that  when 
small  purchases  were  made  with  them  the  tradespeople 
were  obliged  to  make  change  with  cash,  which  soon  de- 
pleted their  supply.  Subsequently,  therefore,  clearing 
house  checks  or  cashiers'  checks,  as  shown,  also  payable 
to  "  Bearer,"  through  the  Clearing  House  only,  in 
amounts  to  $1,  $2,  $5  and  $10,  were  issued.  These 
checks  had  no  collateral  security  back  of  them  and  were 
accepted  purely  on  the  responsibility  of  the  issuing  bank. 


[Page  7] 


Clearing  House  Loan  Certificates 


Chicago,  III. 

Chicago,  in  1907,  issued  certificates  for  the  first  time  in 
its  history.  A  Committee  reported  in  favor  of  them  in 
1893,  but  before  they  could  be  made  ready  for  issue,  con- 
ditions had  improved  to  such  an  extent  that  they  were  un- 
necessary. Their  Clearing  House  Loan  Certificate  was 
in  the  same  form  as  at  New  York  and  so  it  is  needless  to 
show  it.  Early  in  November,  of  1907,  provision  was 
made  for  the  deposit  of  these  certificates  by  any  bank,  and 
the  issuance  therefor,  of  Clearing  House  checks  in  de- 
nominations of  $1,  $2,  $5  and  $10,  in  amount  equal  to 
the  face  value  of  the  certificates  so  deposited,  in  favor  of 
the  depositing  bank.  So  the  checks  were  secured  by  cer- 
tificates, and  the  certificates  by  collateral.  These  checks 
were  all  made  payable  through  the  Clearing  House  and 
were  drawn  on  National  Banks.  They  were  thus  drawn 
in  order  to  avoid  any  complications  that  might  arise  out 
of  provision  of  the  State  Law  for  a  prohibitive  tax  on 
circulation  issued  by  the  State  Banks. 


Cincinnati,  Ohio 

Only  Cashiers'  checks  were  issued  at  Cincinnati,  se- 
cured by  collateral  to  an  amount  20%  to  25%  in  excess 
of  the  amount  issued.  An  interesting  incident  in  con- 
nection with  their  issue,  was  the  fact  that  the  newspapers 
of  that  city  published  a  list  of  merchants,  numbering  in 
excess  of  three  hundred  names,  who  had  expressed  their 
willingness  to  cash  these  checks,  and  in  several  instances 
a  premium  of  as  high  as  five  per  cent,  was  offered  for  pur- 
chases made  and  settled  by  means  of  these  Cashiers' 
Checks.  Thus  the  merchants  did  what  they  could  to 
stimulate  the  confidence  of  the  public  in  these  checks  and 
so  helped  the  situation  along. 


[Page  8] 


mm 


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Ciii(iu;»,  Nmi»otER  11^  1907  N?B  1 1 70 1 

Chicago  CleaioiigHouseAssocialion 

COMMERCIAL  NATIONAL  BANK 

....CHICAGO,  ILLINOIS  0rBeahKrJ|><55] 


R\YTO 

l\VO  AND    lOO 


i: 


of  Chicago 


Ma*a9+  •       • 


THIS  CHECK    IS   PROTECTID  BVSICUHITIES   DEPOI 


:po»itiAv*m  THMHlftAaaqLiAMlA  HOU 

••••     ••    •    * 


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3 


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if. 


Cincinnati,  Nov.  4TF 1907 

flTL&s  N/momL  Bank 


P/IY  T&BE4HRER 


— TWENTY  DOLLARS 

$20°°  .^... 


r?WW^ 


Cleveland,Ohio,Xovember29=1907  N9D 

Cleveland  Clearing  House  Association 


15 


Rwro. 


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$10 


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Ten 


AND   lOO 


IMon  National  Bank 

Cleveland.  Ohio 


<^y?4f*x« 


TMI«  OHtCK    IS   PKOTICTID   BYS.CURITIIS   0IP08ITID  WITH   TH«  CUIVILAMO  CkCANINO  NOUM  AMOOIATK 


= 


THE  COLORADO  NATIONAL  BANK 


m 


Clearing  IIousk  Association 
for  cancellation. 

Registered  Ao. 


iWMTkl.ll  BY  SAID 


jMU     l/)l#!"Ai 

This  check  is  issi;t:u  AOAiss/r  a^kposit  or  ski  i  tint 


>UCH  Th 


XSSOCIATION  .S 


F  DeNVBR     AIDING  ntfUS^ 

tOVKU   ISYTIIK  FlK-VN^K  CUMMITTia:  tf   IlU|II^SA  %K 

sTk«;sti#.  0,-^t$rms  »,fii#k  is  KA»  anii  phkskn  ftn 
7w  Dwvtm  Cu&Rii*9fi$uS£  A&OCiATIQN,    • 


Clearing  House  Loan  Certificates 


Cleveland,  Ohio 

Clearing  House  Loan  Certificates  and  Clearing  House 
checks  both  were  issued  at  Cleveland,  the  latter  being 
issued  against  the  deposit  of  the  former,  as  at  Chicago, 
but  the  Loan  Certificates  in  Cleveland,  unlike  those  of 
Chicago,  were  not  used  for  settling  balances  at  the  Clear- 
ing House,  which  was  their  function  generally  throughout 
the  country,  but  solely  for  the  purpose  of  securing  the 
issue  of  Clearing  House  Checks. 


Denver,  Col. 

Cashiers'  Checks  issued  in  amounts  of  $5,  $10  and  $20 
by  the  individual  banks,  on  the  deposit  of  acceptable  col- 
lateral with  the  Finance  Committee  of  the  Clearing 
House.  A  Registrar  was  appointed  to  register  and  sign 
all  checks  before  issue,  and  the  banks,  by  agreement,  each 
issued  $50,000  of  these  checks,  in  order  to  make  the  ac- 
tion unanimous.  The  checks  were  handsomely  litho- 
graphed, to  lessen  the  chances  of  counterfeiting,  and  on 
the  reverse  side  contained  a  picture  of  the  state  capitol,  as 
will  be  seen  on  the  slide. 


[Page  9] 


Clearing  House  Loan  Certificates 

Des  Moines,  Iowa 

As  will  be  seen,  this  check  states  that  in  addition  to 
being  secured  by  approved  collateral  in  the  hands  of  the 
Clearing  House  Committee,  the  credit  of  all  the  Bank 
members  of  the  Clearing  House  was  pledged  for  its  pay- 
ment, which  pledge  was  covered  by  a  resolution  to  that 
effect.  Few  certificates  issued  stated  that  fact,  though 
literally  all  the  member  banks  of  every  Association  which 
took  action  in  the  matter  of  issuing  certificates  were  so 
pledged. 

Detroit,  Mich. 

Clearing  House  Loan  Certificates  were  issued  in  De- 
troit, but  no  Clearing  House  checks.  Large  pay  rolls 
were  handled  to  some  extent  through  the  issue  by  the  in- 
dividual banks  of  their  Cashiers'  Checks  in  amounts  of 
$5  and  $10  for  that  purpose.  A  considerable  measure 
of  relief  was  afforded,  however,  through  the  procurement, 
by  some  of  the  large  manufacturing  concerns,  of  Cana- 
dian currency,  from  banks  across  the  river,  in  exchange 
for  their  checks  payable  through  the  Detroit  Clearing 
House,  such  currency,  by  reason  of  Detroit's  frontier  lo- 
cation, readily  passing  current  with  the  public. 

Fargo,  N.  D. 

A  Trustee  was  appointed  by  the  Fargo  Clearing  House 
Association  to  receive  collateral  and  issue  certificates  to  an 
amount  equal  to  only  50%  of  such  collateral  deposited. 
This  percentage  represents  as  large  a  margin  of  collateral 
as  was  required  by  any  Association  that  issued  certificates 
during  the  Panic  of  1907.  This  is  practically  the  only 
Clearing  House  Association  which  issued  certificates  in 
small  amounts,  viz:  $5,  $10  and  $20,  as  well  as  in  the 
larger  amounts,  most  Associations  having  issued  Cashiers' 
or  Clearing  House  checks  for  the  smaller  amounts. 


[Page  10] 


MISES  TO   Ijeft-rj  THE   BEARER  ON  OR  BEFORE  THREE  MONTHS    FRO*1  TH?^  DATE/THE  SUM  OF 

••J2(T(T9##A  ONE      DOLLAR  ..,,iV.^5 

•••••  • 

is  certific*<^is  secured  by  the  deposit  of  approved  securities  with  the  clearing  heifse  committee  of  the 

5  Moines  C£a*i«e  House  Association,  and  it  is  also  issued  upon  the  credit  <rt  ^he  Panics  §f^he  city  of 

es  Wftnes.Iovja?  members  of  6aid  Association,  and  will  be  received  by  any  of  saitl  feajiks  on  deposit  or 

payment  en  an^cjbligations  due  them.    Dated  at  Des  Moines,  Iowa,  this  28th  day*>f  October,  A.D.  1907. 

.     •    •  DES  MOINES  CLEARING  HOU^E^SOCIATION. 

T  XfaL/CTIJtfllltENDORSED  A     ^  ,  _  *      .  m 

BY     jfjQP9****  +.>*  «.**** 


THE  PRESIDENT  OR  CASHIER 
A  DES  MOINES  CLEARING 


SE  SANK 


*l 


DES    MOINES  CLEARING   HOUS 


U2M: 


o 


T^ 


t  -4 , , ,  i  f  1 1  /  tt  i  ■  <  ■  ttfrr,,. 


$'.1000 


®^/^k/_.._. 


■/*is*i*-t'/stssi//tsyc/ii'- 


X3&r6/t*'<4  /tin<€*&.— -  _ 


i /€<sti>6fLes 


&k 


"/' 


^  § 


ft. 

m 


FARGO.    N.   D. 


ON    OR    Ey?FOR*5   THREE    MOf.'THS  AFTER    DATE    THE    BANKS  OF    FAROO  AND    MOORHEA>&  COMPOSING   THE 


rHE    CITY    OF     FAROO 


U.iJpAT'rai'HE  BEARER  the  sum  of  TEN    DOLLARS  ( ^»0?CI>V"" 


NATIONAL    BAN*    9 V    FAROtf  t«*ABG 


THE  CLEARIN8  HOUSE  ASSOCIATION  OF  THE  CITY  <?f*fpRGO 


no._LQ01_ 


TMI  5  CWgCK  I  S  PAYABLE  THROUI 


l'orl  Wm*i  i  o.Nov, 


|  I\iylO           HAMILTON  NATIONAL  BANK           Ol*  l)(!,Uer  &  *  1  1 oo 
I VI 2  AMI    m& ; — ^ — rm -* Dollars 


jy 


7 


€dm,,t 


».  2 


Ftwc  Wavx*..  Indiana  t  C-vV 


(OTECTED 


(Elparing  t^ousr  (Unmmittrr  of  %  JFort  Ufaijnr  (CLparirtg  iSjmtap  Aafiariaiion 

No.J^ $5,000.00 

Sljtfl  (CrrtifirB  that  the_ . Bank  has  deposited 

with  this  Committee  securities  in  accordance  with  the  proceedings  of  the  meeting  of  the  Association  on 
October  28,  1907,  upon  which  this  Certificate  is  issued.  This  Certificate  will  be  received  in  payment  of 
balances  at  the  Clearing  House  for  the  sum  of  FIVE  THOUSAND  DOLLARS  from  any  member  of  the 
Clearing   House  Association. 

1 
I 


Manage 


=^. 


QJLlyVy\JLAy^  — 


Committee 


Clearing  House  Loan  Certificates 


Fort  Wayne,  Ind. 

Trust  Company  members  of  the  Clearing  House  were 
not  allowed  to  issue  checks  direct.  Loans,  secured  by  col- 
lateral in  amounts  passed  upon  by  the  Committee,  were 
made,  when  desired,  by  the  bank  members,  and  checks 
drawn  by  the  Trust  Companies  against  such  loans,  were 
paid  with  Clearing  House  checks.  Thus  the  Trust  Com- 
panies were  enabled  to  use  these  checks  in  about  the  same 
manner  as  were  the  banks.  The  Clearing  House  Loan 
Certificates  were  used  both  in  the  payment  of  balances  and 
as  security  for  Clearing  House  checks,  as  at  Chicago. 


[Page  11] 


Clearing  House  Loan  Certificates 


Grand  Rapids,  Mich. 

The  Grand  Rapids  Association  had  prepared  and  ready 
for  use,  although  the  situation  in  that  City  did  not  reach  an 
acute  enough  stage  to  require  their  issuance,  a  rather 
unique  form  of  certificate.  This  form,  as  will  be  seen,  em- 
bodied a  demand  promissory  note  upon  its  face,  which 
provided  for  the  placing  of  collateral  with  the  Association. 
It  further  provided  that  in  the  event  of  the  note  not  being 
paid  on  demand,  the  maker  consented  to  the  sale  of  the 
collateral  thereto.  If  the  proceeds  of  such  sale  were  in- 
sufficient to  pay  the  face  of  the  note,  the  maker  agreed 
to  be  answerable  for  the  deficiency,  thus  placing  prac- 
tically the  entire  assets  of  the  bank  back  of  the  note.  The 
reverse  side  contains  the  Clearing  House  Loan  Certifi- 
cate, in  form  similar  to  those  of  other  associations.  I 
show  this  form  in  two  views  as  being  a  distinct  departure 
from  anything  I  have  seen  of  like  character. 


[Page  12] 


N?     7971  D 


,  0  _^,  ^t  L  Is  indebted  to 

Guaranteed   by    the   Banks   and    Trust   Companies    of    Harrisburg    and   Steelton, 
Pennsylvania,   and   Payable   only  through  the   Harrisbufg  Clearing   House. 


<^Sfe€w: 


This  may  be  deposited,  but  will  not  be  pakl 
in  cash 


Tento  eek   niu/e  byt  *lozem   do    banki   ale 
nebude  vyplacen  v  hotovych  peue/ich  v  banco. — 


Ezen  check  betetkent  elhelyezheto  a  Bank  ha, 
de  kcszpeiuben  ki  ncoi  lesz  fizetve  a  baokban. — 


Questo  cheque  purf  essere  depositato,  ma  noti 
sara  scontato  in  contanti  dalla  banca. — 


ONE  DOLLAR 


CERTIFICATE 


$1000 


Grand^apids.Mich.. 


€%t  y/yv/yyyyyy/  /^py . , dfiy////?/^7 

'//yy/j.  V6/'//^//?://w///t;fcj /?//<?// ///s<  .///n//r/^7/////J  ^aamftfJ^udi^ 
M/ytyyy/yyyy,  f>rfw/r/;///fflyf/f?/M//s/.'/fr/fJrf/  fife  J/////  y/? 

OnbThousahd Dollars,  yyy/yyy-  y'yyy'yy'py/ yyy//y yyy/yy'y:J//y'y>/yy  me  y/yy/y'  y/ '//y'yJ  yyy/y  r/////r 
m&//l__/'/?r/a*At£/&r%imMm  S/yyy//%y>,  marf&zqffifojtde  /yyyj  y/y/yyvy/yy/ 
//'y/^  y^Y,'JYYYY/.r--/ijYrYYY^Yi€YjYr//YYtijr//!M'nY/Y////Y>/-  //yy'/yyy////yy/yZ  y/  //yyj  yyp/p 
yyyyy///v//u  /yyyy//yyyy'/y/y/yy/yyy/y//yyy' <</>?///«/«>//.<///{?  //yyy/Y'ys///yo'/yy>/y' /y'Jsyyy/ 
SyJjyyyyy/yysyy,  y/yyypy'/y^/yyywyyy/yyy,  yyyyy'  yy'Yy/yy/y/yy/y'Y'  yy'/yyy/y  yyyyyy//yy'yyyy//y/'  /'r 
yy>yy /y  yyy/y y/  jyyyyyy/y'yJ  /y>  /yyy  Jyy/yj/yyy/yy>yy  etfku&SiKVflt&ztfw  ■  My  -ma/for  yyy/yyy'J 
^yy/y/y/yyjyyy/y  j/y>yy/// yyy/~/yj-/yyyyy/ yi/yp/y  rfa/tf/7/u/.  //trw/-  r/ijYYYY?/YY>/Y'pr  y/J/ 
/?M/,y//Jj/s///rf//?'e/${///uY/r/-  yy/yy/yyyyM'y>yy/y/  /p  Jy/Zyy/y//  pyyy// //yy  yy/y'yy  .jyyyy  yy/ypJ 
yyy/////yyyy£///ypyyJ  ///p/r/urM/i/Y/rt/rJ  /0pyy/yy:  ^/yy/y^/yyy//yp  py /y  y'y  y'yy/y'  Jyy/y;  p/vy/  yy/y  /y 
A>s//r/f//'/'f>/>/:J,/frrf///f////Jr////fyrf///p///  y//yy/yyyyyyZy/y//-/'yy{y/y/y/yy>/y. .  //p-yyy/Jyyp/y 

y>y  p//  ////  p/y>/y'  JyyyyyyZy<;Jy>yy//y  //yyy/y/y/yp/yj  ////' 

y/y^yy/yy/Zyyvyy  frtWM/afoqwrr&af/f&wi,,  ■  ^  //YY/YYPYrprfjp/'jYYr//.jYY/p  Y>rJYY/fJ  j/yyy/yy 
//r?/r.k^/sYf////r'/-,{tf///s//////sw^  /y> 

Jr///fSws*Y0fotfyw'J/&/7-  f'6//w/////:.  rws/Y//r-  yyyyy/py  y/^yyy:j yp  p^y/p.'/Y/^YY/Y/Y//p/yp'Y 

jr/YY/y/fpj u//W  //s  p'r/SYPY/Yf/Z/Y/  YYy/?YY/Yy/ /p///P<Jf//^  f/j/Y/f/.r/j.jPPff///P/Y 

//fart.  ///p//PY/YYP/Y/;PPJ/P///r///Y>//  PYYy//Y/Y^/P/y/p/yy>/Y  &  Mf  r/pYr??/YY/  .//p'Yjr' 

kyw////y//y<'Jy/  '////J  yyp/s  //YjwY/r//Yj///sY/Y/YY///frtr/Y>Y'j///Y///r  yy/yy/vyyy//y'Y%'y'  ttu&Gff? 


m* 


Grand  Rapids,  Michigan. 


wy 


V«JY?o 


JB        U 

. 

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I 

z      3 

C/5 

OS 

1    8 

0   — 

X 

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CQ         = 

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0 

c 

ise  Loan  Ce 

TO 

DS  CLEARING 
SOCIATION. 

0 

Q 
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Bank  or   Ban 
elivered  in  the 
ie  received. 

% 

S 

s 

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0 

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any 
bed 

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ONE 
Pav  to 

Bank, and 
this  note  m 
of  Business 

SI. 000. 00                                                                                                                                       NO. 

LOAN  CERTIFICATE 

GRAND  RAPIDS  CLEARING   HOUSE  ASSOCIATION. 

C  RAMnRAPin^M'^w 

QC17I5   (£crtifiC5      that   the                                                                                 Rank    of    Grand 

Rapids,  Mich.,  has  deposited  with  this  committee  securities  in  accordance  with  the  Rules  of  this 

Association,  and  the  special   action  and  order  of  the  Association  at  a   meeting  held 

The  within  note  will  be  received  during  the  continuance  of  said  order  and  authority,  in 

payment  of  balances  at  the  Clearing  House  for  the  sum  of  ONE  THOUSAND   DOLLARS 

from  a  debtor   member  of  the  Association,  and  may  be  used  by  the  Manager  of  the  Clearing 

House  in  settlement  of  balances  due  to  any  member 

GRAND  RAPIDS  CLEARING  HOUSE  ASSOCIATION. 

" '-? 
By                                                                     ^ 

[      Clearing 

House 

Commitee 

/',;'.  .     ?      .     ry_%t  f 


W^&^i 


nwMww\m\$MM 


-hi 


mnnmmwm 


SASaCI 


>V«EM%ER  1212..  If9,ff*  •  •*  •- 


00 
00 


stf)      *   •  •     *JVV  '         •  ••Sr 

^^  .  /??3()>sfrer  < : 

— t— ,  M4U^J,^»- *,,.=_»^ ^1  ,'       . 

rHISCERT!FICAm,SPMo*cItD    •«        ft-  ,-•,  ,  ,  .,   ^^f'X.'XfsA  * 

WITH   THE    KANSAS    CITY  *  /     /  *  * 

CLEARINGHOUSE  ASSOCIATION       ft  (yBY 


Series _....                                                                                                                                      »    §§#&— 

Little  Rock  Clearing  House  Certificate 

LITTLE  BOCK,  ABE _ ..„ 1907. 

C)Vve.^u«^,X/ 

Pay  to  the  bearer  USE.  DOLLARS,  when  this  certificate  is  countersigned  by  J.  S.  Pollock, 

manager  of  the  Clearing  House,  or  by  either  one  of  the  members  of  the  committee  hereinafter  named.    This 

certificate  is  secured  by  approved  collateral,  deposited  with  the  undersigned  committee. 

-a 

W.  B.  WORTEEN, 

i 

E.  C.  BATEEB, 

f 

OSCAB  DAVIS, 

•^ 

SAM  W.  BEYBTJBN, 

3 

1 

No.     „                                                                                  Committee  Little  Bock  Clearing  Eouse. 

Clearing  House  Loan  Certificates 

Harrisburg,  Pa. 

Besides  Clearing  House  Loan  Certificates,  the  Harris- 
burg Association  issued  what  it  termed  "  Certificates  of 
Indebtedness  "  stating,  as  may  be  seen  from  the  illustra- 
tion, that  the  Association  was  indebted  to  the  bearer  in  the 
sum  of  $1,  the  payment  of  the  same  being  guaranteed  by 
the  members  of  the  Harrisburg  and  Steelton  Associations, 
but  only  through  the  Harrisburg  Clearing  House.  The 
reverse  side  shows  printed  in  four  languages  (English, 
Polish,  Hungarian  and  Italian)  the  words:  "  This  check 
may  be  deposited,  but  will  not  be  paid  in  cash."  This  was 
undoubtedly  intended  to  meet  the  requirements  of  a  di- 
versified population. 

Kansas  City,  Mo. 

The  Kansas  City  Association  issued  both  certificates 
and  checks,  and  each  were  secured  directly  by  collateral. 
In  this  respect  their  action  differed  from  that  of  most  other 
associations  which  issued  both  these  forms  of  instruments, 
since  generally  the  checks  were  secured  by  the  deposit  of 
certificates,  which  in  turn  were  secured  by  collateral.  The 
checks  issued  by  Kansas  City  were  among  the  finest,  in 
design,  turned  out  by  any  association  in  the  country,  hav- 
ing been  lithographed  by  the  Union  Bank  Note  Company 
of  that  City.  In  form  they  are  not  unlike  many  others 
that  have  been  shown,  and  I  exhibit  both  the  front  and 
reverse  side  merely  that  you  may  see  what  fine  specimens 
they  are. 

Little  Rock,  Ark. 

The  Certificates  issued  by  the  Little  Rock  Association 
were  again  different  in  form  from  any  others,  as  will  be 
seen.  The  chief  distinction  that  entitles  these  certificates 
to  our  consideration  is  the  fact  that  they  carried  interest 
at  the  rate  of  ten  per  cent.,  an  unusually  high  rate  of  in- 
terest, although  it  is  not  so  stated  on  the  certificate. 

[Page  13] 


Clearing  House  Loan  Certificates 


Los  Angeles,  Cal. 

Both  Clearing  House  Loan  Certificates  and  Circulating 
Scrip,  the  latter  corresponding  to  the  Clearing  House 
Checks  used  by  other  associations,  were  issued  in  Los 
Angeles.  Originally,  printed  checks  were  used  for  circu- 
lation, as  shown,  but  later,  fearing  counterfeiting,  litho- 
graphed checks  were  used,  which,  like  those  of  Kansas 
City,  were  very  handsome.  As  will  be  seen,  especially  the 
reverse  side  closely  resembles  the  engraving  on  our  Na- 
tional currency. 


[Page  14] 


ceat&MtiMSa^aCM&t^a^aMS* 


r 


llOHP  Tfci*  Dollars  |lO°^ 

.  /////,////,/  A /j  .>/////  /■////  /////.///Ass///'////  Ms'  r//s/////s/.'////s,j/   y ////////////  /////, 
//,/.' £/g//s /  (/. l///////g  jfyft£6  ■'  /s.Af  ///////'// ,  ///s.j  t /  ,/s////s/s   //////</  /,//s/,/sst 

/'/  I     /4'       /'■/?■■        *%/"''£    W  *""/  4/    *////■    .S/S/////.J    /S'/S//sS<J///S/   ,/SSSsA ■(/j,//J/u/// ■•//    SJ 

„,„/  •/,',,*.-.     •/.:,,^f  ///J0/SS//  +,  ///f ■////>/;    ///s//%P  •  ^g       •  • 

•       •       •  •     •  •  •  -^       *     .   •     •     •     JL_ 


<A 


4&i¥w»4e4j$2fs&&Z. 


•  ♦  • 


P  ▼  ^-^  •    •    •  •  •  « 


sJro.. 


216 


CbifeWM^rtif?: 

has  depositedlvJithlt^Committe^ 
which  are  Htp  as\h  Bpecial  De] 
adopted  hV  Mid  Banks  on  the 

Certificate  wil 
mentfcf  ]&alances  resulting] 
annuA  from  date  until  redeem7 

$1000.00 


tearing  If  mtH*  &&mmtwn. 

ffmaXa,  J  Jr.. »0V  \      Ml 


First  National  Bank, 


nted  by  the  Associated  Banks  on  October  28th,  1907,  approved  securities 
secure  the  redemption  of  this  Certificate  in  compliance  with  resolutions 
e  named, 
for  the  sum  of  ONE  THOUSAND  DOLLARS  without  endorsement,  in  settle- 
hanges  between  the  Banks,  will  bear  interest  at  the  rate  of  six  per  cent,  per 
will  be  negotiable  only  between  the  Associated  Banks. 


o£  10095  J  $5,OOCh 

^toting  J^omt  ^ummttee.af  the  ptMdjrijia  fptltfc 


|HIS  CERTIFIES,  that 
I!  W         has  deposited  with   this    Coihmittee,  secu 
S  Bank  Officers,   held  September  24.  I1873.      Tit 
I  agreement  and  of  any  renewals 

FIVE  THOUSAND  I  OL1 

to  whom  the  same  may  have  I 


i  the  surrender  of  this  Certificate  I 


e  obligation  of  said 


through  the  "Clearing  House  Association  of  Philadelphia 


accordance  with  the  agreement  of  a  Meeting  of 
\te  will  be  received  during  the  continuance  of  said 
of  balances  at  tlie  Clearing  House,  for  the  sum.  of 
$nly  from  a  Member  of  the  Clearing  House  Association, 
may  be  endorsed  by  the  Manager  of  the  Clearing  House. 


•      • 


•• 


Clearing  House  Loan  Certificates 


Omaha,  Nebr. 

Here  is  an  illustration  of  the  Clearing  House  Certificate 
used  in  Omaha.  The  word  "  Cancelled  "  has  been  written 
across  it  with  acid,  which  has  eaten  away  some  of  the 
paper.  Omaha  banks  also  were  at  liberty  to  issue  their 
own  Cashiers'  checks  in  amounts  of  $1,  $2,  $5,  $10  and 
$20,  after  they  had  deposited  collateral  with  the  Manager 
of  the  Clearing  House,  to  an  amount  25%  in  excess  of 
the  total  they  desired  to  issue,  and  he  had  stamped  across 
the  check,  "  This  check  is  secured  by  collateral  approved 
by  the  Loan  Committee  of  the  Omaha  Clearing  House 
Association,  deposited  with  its  Manager  as  Trustee." 


Philadelphia,  Pa. 

The  Clearing  House  certificates  issued  in  Philadelphia 
were  almost  identical  with  those  of  New  York,  and,  there- 
fore, require  no  special  comment.  The  Philadelphia 
Banks  also  issued  what  were  known  as  Pay  Roll  checks. 
These  checks  were  prepared  by  the  American  Bank  Note 
Company,  in  convenient  amounts  for  the  payment  of  pay 
rolls.  Before  these  checks  could  be  passed  through  the 
Clearing  House,  it  was  necessary  that  they  should  be  cer- 
tified by  the  bank  of  issue,  and  each  institution  was  di- 
rected and  required  to  set  aside  a  "  Pay  Roll  Account " 
for  each  depositor  to  whom  such  checks  were  issued, 
against  which  all  such  pay  roll  checks  should  be  charged 
when  paid. 


[Page  15] 


Clearing  House  Loan  Certificates 


Portland,  Ore. 

This  association  issued  both  certificates  and  checks.  The 
certificates  were  in  ordinary  form,  while  the  checks  dif- 
fered from  others  only  in  that  they  bore  the  date  of  Feb- 
ruary 1st,  1908,  as  the  limit  of  their  usefulness.  These 
checks,  too,  were  in  rather  elaborate  form  as  will  be  seen 
from  the  illustration. 


[Page  16] 


MIRTdMIB,  ORE 

TkisOrtififS  ih/ii  Thl*M)tis\vmpf)sityih/%rtlan 

»t "thirty  (Ml/iPs  (SywMthy/fr/i/'u'h/ialyntin.t     , 

ftj  ky  It*  nnfttuiliff  ta  si'aur  to  Ihewatrr 


m 


TWDEWTV   B9C9SLflL^B¥S    Sii2«qLa 


in  lau'M  mm, 
This ceiiiftMi 


1/le/rn  or  btfoiY  the 
V%£  fortiand  Cka 

riy  btmbinyaid 


(tt*rttfuat* 

NOT  VALID  UNLESS  COUNTERSMNED  IT  THE  SECRETARY 

t 

exeat  of  the  amount  of  thU  CerSfieate,  to  m&*  SSB  &W*r  AcrwtA  payment  in  (V  M»m  0/ 

One  Thousand  Dollars, 

payable  through  Up  9t. 

ThU  Certificate  U  Utued  i 

ingt  of  q  meeting  of  taid^A  saoc 
day  of  November.  ltol.dRtfwiU  „ 
in  payment  ofaebU  ttgtpny  bank 


Clearing  House  Loan  Certificates 


St.  Joseph,  Mo. 

A  lithographed  certificate  was  prepared  in  St.  Joseph, 
like  the  one  shown  on  the  screen.  The  comparative  ease, 
however,  with  which  these  certificates  could  be  imitated, 
made  it  seem  inadvisable  to  use  them,  so  they  were  never 
issued.  They  did,  however,  issue  Cashiers'  checks  which 
were  received  and  used  by  the  public  with  general  satis- 
faction. 


[Page  17] 


Clearing  House  Loan  Certificates 


St.  Louis,,  Mo. 

The  form  of  the  loan  certificates  used  in  St.  Louis  was 
identical  with  the  style  employed  in  other  large  centres. 
The  banks  did,  however,  issue  Cashiers'  checks,  of  which 
I  shall  show  you  three,  each  one  being  slightly  different  in 
form.  The  first,  that  of  the  Third  National  Bank,  is 
made  payable  to  H.  Haill,  Auditor,  thus  requiring  an  en- 
dorsement. The  second,  that  of  the  National  Bank  of 
Commerce,  is  made  to  John  Smith,  or  bearer,  requiring 
no  endorsement.  The  third,  that  of  the  Mechanics  Ameri- 
can National  Bank,  is  made  simply  to  bearer.  It  will  be 
noted,  too,  that  this  check  is  countersigned,  whereas  the 
other  two  are  not. 


[Page  18] 


t4 


xwawiiua.  BUNK 


St.Louis.Mo.Nov.  1?'  1907. 


Pay  to  tlie  order  of 


N9  293030  -A. 


^/T^rf 


>o  liars 


Pa  jvihle  through  St.  Lrviis  Clearai^  House  oniy 


Cashier's   Check:. 


^e^^^sss^ 


7* 


T«TiiK  National  Bank  <>r  Commerce  m  St.  Louis. 


M 


au 


n 


'<•/*/'  t  /// 


ftiv^s  /<r«/r/>     "5&E  394761 


//r 


Moffat 


ABLE  OHty  THBOUOM   TH!   ST.  LOUIS   CL-BABtNO  HOUSt. 


^^ 


I 


CASHIERS  CHECK 

MECHANICS  AMERICAN  NATIONAL  BANK 

SURPLUS    ^2.500,000. 


CAPITAL    $2,000,000. 


PAYTOTHE  ORDER  OF 


st.louis.    NOVEMBER  I ?T  1907.         no.    43201 

BEARER $  12? 


ONE 


Payable  through  St.  L^ujeJiLeARiNG  House  only 

COU  NTERSIGNEI 


DOLLARS. 


h 


OM 


0 

a!i 

■d 
c 

i 

3 
0 


Nn       198 


ICnatt  (Eammtttw  nf  tlj? 


$5,000. 


&t  paul  Glaring  l^mae  AaBnriatum 


©hie  ©crtiftee,  That 


^WgT^p 


1907 


has  deposited  with  this  Committee  securities  in  accordance  with  the  proceedings  of  a  Meeting  of  the 
Association,  held  October  29th,  1907,  upon  which  this  Certificate  is  issued.  This  Certificate  will  be 
received  in  payment  of  balances  at  the  Clearing  House  for  the  sum  of  Five  Thousand  Dollars, 
from  any  member  of  the  Clearing  House  Association.  %  *  % 

Valid  only  when  rcijl.vlereil  by  Northwestern    trust  £ompa%y,  St/}'au%  Min£. 


dcr  a  proportionate  s 


Registered. 


NORTHWESTERN  TRUST  CO 


$!©© 


No.    1000 

IxprutiDi?  ttiratmtttw  of  %  £alt 


This  certifies  that  the 
with  this  Committee  securities  in  accord 
which  this  certificate  is  issued. 

This  certificate  will  be  received  in  payment  of  balances  fo/ihc  turn  of  ONE 
and  draws  intercfl  at  the  rate  of  eight  per  cent  per  annum  hot/date, 
among  meraben  of  thi.  Clearing  House. 


On  the  sun 

and  surrender  a  proportir 


(Ettg  GHeartnn,  ^ouhp. 


has  deposited 

of  the  Association  heretofore  held,  upon 


as  a  payment  on  the  obligation  of  said  bank  held  by 


'Wm&A 


Descret  National  Bank, 


2 

X,  EXECUTIVE    COMMITTEE. 


— r  J 


Clearing  House  Loan  Certificates 


St.  Paul,,  Minn. 

Valid  only  when  registered  by  the  Northwestern  Trust 
Company. 


Salt  Lake  City,  Utah 

Neither  the  Clearing  House  Certificates  nor  the  Clear- 
ing House  Checks  possess  any  unusual  features,  and  are 
simply  shown  in  passing. 


[Page  19] 


Clearing  House  Loan  Certificates 


San  Francisco,  Cal. 

The  Clearing  House  Loan  Certificates  issued  in  San 
Francisco  possessed  no  unusual  features.  The  specimen 
of  the  Clearing  House  currency  herewith  shown  was 
printed  originally  on  safety  paper,  but  it  was  soon  dis- 
covered that  this  grade  of  paper  would  not  stand  the  wear 
and  tear  of  general  usage,  so  lithographed  certificates 
on  bond  paper  were  substituted,  the  first  issue  being  re- 
called. This  currency  was  issued  against  the  deposit  of 
Clearing  House  certificates,  and  was  used  by  the  San 
Jose  Clearing  House  Asssociation  as  well  as  by  San 
Francisco. 


[Page  20] 


•Vo $20,000 

Loan  Committee  of  the  San  Fkancisco  Clearing  House  Association 

SAN  FRANCI8CO 1907 

GJljtB  fflprttftPB  that  the 

has    deposited   with   this    Committee  securities,  in    accordance    with    the    proceedings    of 
a  Meeting  of  the  Association  held  October  28,  1907,  upon  which  this  Certificate  is  issued. 
This   Certificate  will  be  received  in  payment  of  balances  at  the  Clearing   House  for   the 
sum  of  Twenty  Thousand  Dollars  from  any  member  of  the  Clearing  House^ssociation. 
On   the  surrender  of  this  Certificate  by  ^P 

the    depositing    bank    above    named,    the  JBk  J^. 

Committee  will  endorse  the  amount  as  a  ^^ flfc ^f 

payment  on  the  obligation  of  said   bank  ^^  ^^  ^^  /  s 

held  by  them,  and  surrender  a  proportionate  Vf  ^jJF  ^| 

share  of  the  collateral  securities  held  there-  ^^r 

m  % 

320,000  ^  w 


/ 


////-  S/Y///SY.J/Y  '  Y/fYS/Y////'  YrYYYjY'  '  U/YY/YYY//Y' 


YC 


/.907 
OO 


8  20  8P    TVtEXxr  I>  o  luk  s     j|20 

f//Yf  •  ' ' /jJK'/.m//Y/ '•  7j/Y///&// '''./'///-  Y/'////r/.)W.  YY/s. ,  Y/'YY//Wf--s//f 
'///'/■/<  «rr//A//>f/>/y  ///>  .Jrsss/.  W/7/?Yrjy<sr/*YYs 


santrancisco  clearinghouse  ; 

BlWiF^  CFRTIFirVTE 

)f*N  MUXCIS  CO,  CALIVOHNU  ,  M  KOVBMBRR   1  «?•    IS 

MBit         ^pes^^M BilffM^gl^^,..  ATon  401  qi  i 


—— — 


N?     5501 


SAVANNAH  CLEARING  ASSOCIATION 


SERIES  1  A.  SAVANNAH,  GA 

rT%-itf   C*  *<*>++& a*  T*131   tbe   Banks  coJfcM3£^e   SAVANNAH   CLEARHft  ASSOCIAT1C 
±    nib    \^JtrC7/7e$  deposited  with  F    ^M^pwfcWv Mills  B.  Lane,  M    JU/O'Byrne,  W.  W.  Osborne 
and  W   F   McCauley,  Trustees  of  said  Clearing  A4§j$ppij|^l^g!^ies  to  the  value  /t>f  ONE  DOLLAR  and  FIFTY 
CENTS,  to  secure  to  the  bearer  hereof  the  pa] 


in  lawful  money  of  the  United  States,  payable 

issued  in  accordance  with  the  proceedings  of 

"ovember,  1907,  and  will  be  received  on  Deposit 


CLEARH 
le,  M  tyl 
value  **Q 


t(  ds^of  .March,  1908.     This  Certificate  is 

'■^ssocjation  held   on   the  Fourth  day  of 

ue  any  Bank  in  said  Clearing  Association. 


_____ 





-FOR  TRUSTEES. 


— — — 


i 


o 
o 

• 

o 
o 
o 

o 

H 

m 


No.. 


97 


810,000.00 


Loan  Coiv«vuttee 
Seattle  CLEAiliijifG  "house  Association 


•  •  Sfcttfe,« 

•  ••      •    •" 


1907 


TIFIES  that  th%»*    V «    «♦* 


has  deposited  with  this  Committee  securities  in  accordance  with  the  proceedings  of  a 
meeting  of  the  Association  held  November  4,  1907,  upon  which  this  certificate  is  issued. 
This  Certificate  -will  he  received  in   payment  of  balances   at  the  Clearing  House  for  the 

sum  of—  TEN    THOUSAND-  -Dollars 

from  any 


member  of  the  ClfcGing  H#use  Assdfti*mn. 


On  the  surrender  of  this  certificateJ>y  the  — 
depositing  bank  above  named,  tbe  committee 
will  endorse  the  amount  as  a  payment  on  the 
obligation    of    said    bank  held  by  them,  and 
surrender  a  proportionate  share  of  the  collat-    0 
eral  securities  held  therefor.  0         £ 


$10,000.00 


•  • 

• 

• 

• 

• 

• 

•  • 

• 

• 

• 

• 

• 

• 

Clearing  House  Loan  Certificates 


Savannah,  Ga. 

Clearing  House  checks  issued  in  Savannah  were  stated 
on  their  face  to  be  payable  on  or  before  March  1st,  1908, 
about  four  months  from  the  date  of  issue. 


Seattle,  Wash. 

As  indicative  of  the  character  of  the  business  of  Seattle, 
it  was  especially  mentioned  in  the  set  of  resolutions  passed 
by  the  Association  authorizing  the  issue  of  certificates  and 
checks,  that  on  drafts  fully  secured  by  lumber,  wheat  and 
canned  fish,  the  Committee  would  issue  checks  to  the  ex- 
tent of  75%  of  the  face  value  of  the  collateral.  The 
banks  in  that  city  had  large  balances  in  Chicago  and  New 
York,  upon  which,  on  account  of  the  clogging  of  Inland 
Exchange  of  which  I  have  already  spoken,  they  were 
unable  to  secure  cash.  They,  therefore,  gave  their  checks 
against  these  balances  to  the  Committee,  and  when  they 
had  been  collected  and  placed  to  the  credit  of  the  Commit- 
tee, said  Committee  issued  checks  against  such  collections 
to  the  full  amount  of  the  same. 


[Page  21] 


Clearing  House  Loan  Certificates 


Sioux  City,  Iowa 

Issued  only  Clearing  House  certificates  which  were  due 
ninety  days  from  their  date,  October  28th,  1907,  and  all 
were  retired  before  maturity. 


South  Bend,  Ind. 

A  specimen  is  shown  herewith  of  the  South  Bend  Asso- 
ciation check,  which  differs  from  other  checks  of  the  same 
character  only  in  that  it  is  payable  to  "  Any  Associated 
Bank,  or  Bearer." 


[Page  22] 


tt,846      \^Sioux  City  Clearing  House  Association  Certificate  $».ooaoo 

^^-^^T^y  SIOUX  CITY,  IOWA 

I  CbiS  Certifies,  That  the-i^anlcFSoflaposing-  the  Sioux  City  Cleai  ing  House  Association  have  deposited  with  the  Loan 
Committee  of  said  Clearing:  House  Association  secoritits  to  the  value  of  Twelve  Hundred  and  Fifty  Dollars  ($1,250.00), 
to  secure  to  the  bearer  hereof  the  payment  of  the  sunt-  of  One  Thousand  Dollars  ($1,000.00)  in  lawful  money  of  the 
United  States,  payable  on  or  before  ninety"Says  from  date.""  ■ 

This  certificate  is  issued  in  accordance  with  the  proceedings  of  a  meeting;  of  said  Association  held  on  the  28th  day 
of  October,  {907,  and  will  be  received  on  deposit,  or 


Dated  October  28,  1907. 


sit,  or  inpayment  of  debts  due  any  bank  in  saidj  Clearing-  House  Association. 

•    •    •_*  •    •    •* 
•  •    •  •    .V-  •#•  •  • 


THIS  tHECHIS  PAYABlt   I)«IV  THHOLOH  SOUTH  BIND  CIEARIN6  HOI  SI  AND  MCST 

BE  COLLECTED  THROUGH  A  BANK.  NO   A 


South  Bend,  Indiana,    \;j(.  >y  .0  1001 


vis  fob  r 

ONE 


l|^t«_  ANY  ASSOCIATEC  ,,i„,w  $  tfiy# 

4mjx?M&  - - 


JHIS  CHECK  ISP  ITIES  DEPOSITED  WITH    IE  SOUTH  BEND  CLEARING  HOUSE  ASSOCIATION. 


Spokane  Clearing*  HGofise  Association  Check 


The  Spokane*  Clearing  Hou«4  \Moctatiou  will  pay  to  the 

bearer  hereof  on  demand 

•         ••••        •  ••        •• 

•  •         •       •     ••         •       •  •       • 

FIVE:  DOLIiAttg /'.  1 


5u *"^ ***!*    '■    &-*■  *"*  ,-.■*, 


TaOOMA-.  ( LHAKIXJ*  IIOlISEtCEKTIFHuVI K 


4$>      &£\:\ 


t^T'Lr*. 


/s^,,,,,://",/,',,'//,,,,.  l,,'?/*/3'#7.  ' 


TWO    DOLLARS 


TOR  THE  COMMITTEE 


DOLLARS 


Clearing  House  Loan  Certificates 


Spokane.,  Wash. 

By  resolution,  $2,200,000  of  these  checks  were  issued,  at 
Spokane,  and  they  were  distributed  among  the  various 
Clearing  House  banks  in  proportion  to  their  deposits. 


Tacoma,  Wash. 

The  Clearing  House  check  here  shown,  one  issued  in 
Tacoma,  contains  no  special  features,  but  on  its  reverse 
side  is  the  regular  endorsement  of  the  First  National 
Bank,  of  Pasco,  Wash.,  indicating  that  it  had  wandered 
away  from  Tacoma.  There  is  no  doubt  that  much  of  the 
temporary  currency  issued  by  the  larger  Clearing  Houses 
of  the  West  served  as  money  for  the  time  being  in  the 
smaller  surrounding  cities. 


[Page  23] 


Clearing  House  Loan  Certificates 


Topeka,  Kan. 

The  Banks  of  Topeka  agreed  to  put  up  $25,000  each  in 
approved  commercial  paper,  against  which  scrip  to  the 
extent  of  75%  of  the  collateral  deposited  should  be  issued. 
Only  a  total  of  $42,000  was  put  out,  however,  and  this  was 
all  retired  by  January  1st,  1908,  having  been  in  circulation 
only  about  two  months.  It  will  be  seen  that  this  check, 
according  to  the  statement  on  its  face,  was  payable  in  ex- 
change, which  meant  that  it  would  be  paid  with  a  check  on 
some  other  city. 


Wichita,  Kan. 

Neither  the  Loan  Certificates  nor  the  Clearing  House 
checks  issued  at  Wichita  contained  any  unusual  features, 
and  I  show  them  merely  in  passing. 


Wheeling,  W.  Va. 

The  certificates  used  at  Wheeling,  West  Virginia  (al- 
though no  specimen  is  shown),  bore  no  interest,  but  in  lieu 
thereof  were  returned  through  the  Clearing  House  on  the 
day  after  receipt,  with  an  exchange  charge  of  ten  cents 
each,  added. 


[Page  24] 


1000 


MEMBERS: 

FOURTH  NATIONAL  BANK 
V*  KANSAS  NATIONAL  BANK 
C£     NATIONAL  BANK  OF  COMMERCE 

<     NATIONAL  BANK  OF  WICHITA 
AMERICAN  STATE  BANK 

o  No- 

Q 

Q 

Z 

< 
in 

O 

o 

X 
H 


$5,000.00 


CLEARING  HOUSE  COMMITTEE 


WrCHlTA   CLEARING    HOUSE  ASSOCIATION 


Wichita,  Kansas, 1 907 


SIfta  (fortifies.  That  the - _ - 

has  deposited  with  this  committee  securities  in  accordance  with  the  proceedings  of  a  meeting  of  the 
Association  held  October  28th,  1907,  upon  which  this  certificate  is  issued.  This  certificate  will  be  received 
in  payment  of  balances  at  the  Clearing  House  for  the  sum  of  $5,000.00  from  any  member  of  the  Clearing 
House  Association,  or  from  any  bank  clearing  through  such  member 


of  this 
named,  the  comm 
the    obligal 


$5,000.00 


Clearing  House  Loan  Certificates 

As  stated,  during  the  two  or  three  days  remaining  in 
October,  1907,  after  the  New  York  Clearing  House  As- 
sociation had  taken  action,  the  Clearing  Houses  of  the 
country,  with  practical  unanimity,  met  and  made  provi- 
sion at  least  for  the  issue  of  some  form  of  instrument  that 
would  aid  in  relieving  the  existing  conditions.  A  few 
clearing  houses,  prominent  among  which  was  the  Associa- 
tion at  Washington,  D.  C,  found  no  occasion  for  action 
at  all  but  quite  generally  provision  was  made  so  that  in 
case  of  necessity  there  would  be  no  delay  in  getting  the 
machinery  started  and  in  a  very  large  majority  of  cases, 
the  situation  was  sufficiently  trying  to  cause  the  immediate 
use  of  such  Certificates.  These  instruments  bore  rates  of^ 
interest  varying  from  five  per  cent,  to  ten  per  cent.,  and 
in  one  instance,  twelve  per  cent.,  and  were  issued  for  from 
fifty  to  eighty  per  cent,  of  the  collateral  deposited  to 
secure  them. 

It  is  practically  impossible  to  estimate  the  amount  of 
these  Certificates  outstanding  at  any  one  time.  Suffice  it 
to  say  that  in  excess  of  two  hundred  and  fifty  millions  of  ^ 
them,  in  the  aggregate,  were  issued  during  the  panic  by 
the  various  clearing  houses  of  the  country.  In  addition 
thereto  some  of  the  railroads  and  a  few  of  the  larger  in- 
dustrial corporations  issued  checks  of  various  denomina- 
tions, which  were  used  in  making  payment  of  wages  to 
their  employees  during  the  period  of  extreme  stringency, 
which  checks  passed  current  for  the  time  being. 

Taken  as  a  whole,  these  instruments  served  well  the 
purpose  for  which  they  were  issued,  and  once  again  the 
utility  of  them  as  an  emergency  measure  was  demonstrated 
in  a  practical  way,  and  on  a  scale  the  magnitude  of  which 
had  never  before  been  approached. 

Clearing  House  Loan  Certificates  create  an  elasticity  in 
the  assets  of  banks.  In  times  of  financial  stress  what  the 
banks  require  are  assets  that  are  readily  convertible  into 
cash,  and  which  will  pay  depositors  as  well  as  afford  a 
basis  for  the  creation  of  new  loans.  At  such  times  banks 
need  expansion  in  the  right  direction  and  not  contraction. 
In  an  address  which  I  delivered  at  Columbia  University, 

[Page  25] 


Clearing  House  Loan  Certificates 

in  December,  1907,  in  the  midst  of  the  panic,  I  stated  I 
believed  that  in  the  adaptation  of  the  Clearing  House 
Loan  Certificate  we  had  a  solution  of  the  currency  prob- 
lem in  this  country,  and  the  more  study  I  have  given  to 
the  subject  the  more  I  am  convinced  of  the  soundness  of 
my  contention.  We  do  not  need  more  fixed  currency  in 
this  country,  but  we  need  flexibility  in  what  we  have  to 
meet  emergencies  such  as  arose  in  1907.  Any  currency 
issued  in  such  an  emergency  should  be  promptly  retired  as 
soon  as  its  usefulness  has  ceased. 

In  times  of  panic  or  extremely  tight  money  the  banks 
need  something  that  will  enable  them  to  convert  their  fixed 
assets  into  liquid  assets,  without  calling  upon  borrowers 
for  payment  of  their  loans,  and  with  these  new  liquid  assets 
furnish  further  credit  to  their  customers.  In  such  times 
the  demands  of  occasional  as  well  as  all  other  borrowers 
upon  the  banks  are  very  large.  It  is  really  the  purpose 
of  Clearing  House  Loan  Certificates  to  allow  the  banks  to 
take  to  the  Clearing  House  their  fixed  assets  and  convert 
them  into  a  medium  of  exchange  between  themselves,  thus 
allowing  the  extension  of  further  credit,  which  credit  is 
utilized  by  their  depositors  through  the  Clearing  House. 
Add  to  this  function  one  more  and  we  shall  have  all  that 
is  needed  to  meet  any  emergency  that  may  arise,  viz:  A 
currency  to  take  the  place  of  that  which  is  hoarded.  The 
hoarding  of  money  always  accompanies  panics.  This 
feature  was  especially  noticeable  during  the  late  panic, 
because  the  use  of  such  a  large  volume  of  Clearing  House 
Loan  Certificates  between  the  banks  in  settlement  of  bal- 
ances served  to  drive  currency  out  of  circulation  among 
the  banks. 

Panic  always  produces  fright,  not  only  among  the  pub- 
lic at  large  but  also  among  the  banks  themselves,  and  if 
at  such  a  time  we  could  have  a  safe  currency  which  would 
fill  in  the  gap  temporarily  and  thus  allay  that  fear,  we 
should  have  solved  the  problem,  as  far  as  the  banks  are 
concerned. 

The  reserve  balances  of  the  country  banks  are,  as  a  rule, 
kept  in  the  large  money  centres,  and  upon  these  centres 

[Page  26] 


I 


J 


Clearing  House  Loan  Certificates 

the  out-of-town  institutions  depend  for  their  excess  re- 
quirements of  currency.  Besides  the  withdrawals  from 
the  money  centres  by  the  country  banks,  there  is  the  hoard- 
ing of  currency  by  the  public,  to  which  I  have  already 
alluded,  which  currency  would  ordinarily  flow  back  and 
forth  in  the  banks.  This  is  especially  the  case  as  soon  as 
the  slight  premium  on  currency  which  generally  accom- 
panies panicky  conditions  makes  its  appearance.  This 
situation  necessitates  heavier  withdrawals  from  the  banks 
for  pay  rolls,  and  the  conditions  thus  created  are  a  serious 
menace  to  all  the  banking  institutions  of  the  country.  If 
we  could  evolve  a  plan  that  would  come  quickly  to  the  aid 
of  such  a  situation,  a  great  service  would  be  rendered. 

I  have  made  a  careful  study  of  the  currency  payments 
of  one  large  institution  in  this  City,  from  October  26th, 
1907,  to  January  4th,  1908,  which  was  the  acute  period  of 
the  panic.  During  these  seventy  days,  this  institution  paid 
out  $15,863,000  of  currency.  By  currency  I  mean  gold 
coin,  silver  and  gold  certificates,  etc.,  etc.  Of  this  amount, 
$5,113,000  was  shipped  out  of  town  to  its  correspondents, 
and  $10,750,000  was  paid  out  over  the  counter.  Of  this 
latter  amount  $6,360,000  was  for  pay  rolls,  and  the  bal- 
ance, $4,390,000  represented  payments  to  Trust  Com- 
panies, Savings  Banks  and  the  miscellaneous  customers 
of  the  institution.  I  cite  this  as  an  illustration  of  the  mag- 
nitude of  the  calls  that  are  made  upon  the  banks  during 
times  of  panics,  and  the  absolute  necessity  for  some  method 
of  converting  the  fixed  assets  of  our  institutions  into  liquid 
assets. 

In  order  to  provide  for  this  emergency  currency  which 
is  so  greatly  needed  at  times,  I  would  have  the  Clearing 
House  in  each  of  the  Sub-Treasury  cities,  viz:  Baltimore, 
Boston,  Chicago,  Cincinnati,  New  Orleans,  New  York, 
Philadelphia,  St.  Louis  and  San  Francisco,  incorporated, 
recognized  by  law  and  prepared  to  do  business  with  the 
United  States  Government.  I  would  have  a  United 
States  Emergency  Currency  printed  in  large  quantities 
and  held  under  adequate  safeguards  at  each  of  these  Sub- 
Treasuries.     I  would  permit  the  Treasurer  of  the  United 

[Page  27] 


Clearing  House  Loan  Certificates 

States,  upon  proper  application,  to  receive  Clearing 
House  Loan  Certificates  of  the  Associated  Banks  in  any 
of  these  cities,  as  collateral  security,  and  advance  50% 
of  the  amount  of  such  certificates  deposited,  in  Emer- 
gency Circulation,  to  such  Association.  Such  circulation 
should  bear  6%,  so  that  it  would  be  retired  at  once 
when  no  longer  required.  This  circulation  would  thus 
cost  the  banks  12%,  as  they  would  be  obliged  to 
pay  6%  on  the  full  face  value  of  the  Loan  Certifi- 
cates deposited  with  the  Sub-Treasuries  as  collateral 
for  the  issuance  of  this  kind  of  currency.  The  Clear- 
ing Houses  in  these  Sub-Treasury  cities  could  make 
rules  and  regulations  for  apportioning  this  currency 
among  their  members.  I  would  have  this  United  States 
Emergency  Currency  retired  by  the  deposit  of  lawful 
money  with  the  Treasurer  of  the  United  States,  just  as 
National  Bank  circulation  is  now  retired.  Experience 
has  shown  that  this  can  be  readily  done,  because  after  every 
panic  through  which  this  country  has  passed,  there  has 
been  a  great  reaction  and  money  has  become  extremely 
easy.  There  would,  therefore,  be  no  difficulty  in  the  banks 
securing  the  funds  necessary  to  redeem  this  currency. 

It  may  be  said  that  by  confining  the  issue  of  Emergency 
Currency  to  Sub-Treasury  cities,  we  would  be  legislating 
in  favor  of  certain  sections  of  the  country,  but  I  am  sure 
that  the  banks  in  these  sections  would  be  better  able  to 
care  for  the  needs  of  the  country  at  large,  than  if  we  had 
one  central  bank  in  one  city  which  would  issue  currency 
to  its  depositing  banks  throughout  the  country. 

In  this  list  of  Sub-Treasury  cities  are  included  the  three 
Central  Reserve  cities  of  the  United  States,  viz:  New 
York,  Chicago  and  St.  Louis.  Of  the  two  hundred  and 
fifty  million  dollars  of  various  instruments  designed  to 
temporarily  take  the  place  of  cash,  which  I  previously 
stated  were  issued  during  the  panic  of  1907,  these  three 
cities  issued  $157,265,000,  or  more  than  60%  of  the  entire 
amount,  while  the  amount  issued  by  the  nine  Sub-Treas- 
ury cities  was  $206,254,000,  or  more  than  80%  of  the  total 
of  these  instruments  put  out,  which  shows  conclusively 

[Page  28] 


Clearing  House  Loan  Certificates 

that  if  these  cities  were  given  the  privilege  referred  to, 
the  whole  country  would  share  in  the  benefits  of  the  issues. 

You  can  have  no  better  collateral  for  a  currency  such  as 
I  have  suggested  than  Clearing  House  Loan  Certificates, 
issued  under  proper  safeguards  and  carrying,  as  they  do, 
the  joint  guarantee  against  loss  of  all  the  members  of  the 
Clearing  House  issuing  the  same.  Of  course,  I  am 
aware  that  this  would  mean  a  change  in  our  laws,  and  the 
injecting  into  our  currency  of  another  kind  of  money,  but 
it  would  be  secure  beyond  peradventure,  its  retirement 
would  be  provided  for  promptly,  and  when  outstanding  in 
the  hands  of  the  public  would  be  covered  by  ample  col- 
lateral or  by  lawful  money  of  the  United  States  deposited 
against  its  retirement.  I  venture  the  prediction  that  the 
people  of  this  country  will  never  permit  its  circulating 
medium  to  be  monopolized  by  one  institution,  no  matter 
how  good  it  may  be,  but  they  will  always  demand  a  circu- 
lating medium  issued  by  the  Government,  or  under  care- 
ful governmental  supervision  and  approval.  This  being 
the  case,  why  not  adapt  ourselves  to  our  present  condi- 
tions, rather  than  endeavor  to  force  upon  the  country  a 
new  set  of  laws,  injecting  into  our  banking  system  some- 
thing entirely  foreign  to  us. 

This  United  States  Emergency  Currency  which  I  have 
mentioned  must  be  issued  by  the  United  States  Govern- 
ment to  be  of  service  to  the  whole  country.  In  consider- 
ing this  feature,  we  must  remember  that  up  to  date  the 
National  Banks  have  had  a  monopoly  of  the  note  issuing 
power,  and  some  provision  should  be  made  in  times  of 
stress  and  panic  to  take  care  of  all  the  banking  institu- 
tions of  the  country.  As  membership  in  our  Clearing 
House  Associations  is  not  confined  exclusively  to  National 
Banks,  but  includes  State  Banks  and  Trust  Companies, 
in  an  Emergency  Currency,  as  outlined  by  me,  these  in- 
stitutions would  all  be  benefited. 

I  would  include  in  the  act  of  incorporation  of  the  Clear- 
ing Houses  in  the  Sub-Treasury  cities  a  provision  that 
Clearing  House  Loan  Certificates  should  be  issued  at  such 
times  as  in  the  wisdom  of  the  members  of  the  association 

[Page  29] 


Clearing  House  Loan  Certificates 

they  were  needed,  and  thus  provide  a  flexible  currency  for 
crop  moving  periods  or  other  times  of  monetary  tightness. 
We  must  always  bear  in  mind  that  an  Emergency  Cur- 
rency of  any  kind,  in  order  to  be  effective,  must  be  quickly 
retired  and  cancelled,  and  must  not  be  permitted  to  remain 
outstanding  to  cause  the  further  inflation  of  our  already 
too  much  inflated  currency.  By  providing  for  its  retire- 
ment by  the  deposit  of  lawful  money  another  great  safe- 
guard would  be  thrown  around  it. 

You  will  remember  that  during  the  last  panic,  the  mer- 
cantile interests  of  this  country  stood  like  a  rock,  and  there 
were  very  few  failures.  Of  the  collateral  held  against 
Clearing  House  Loan  Certificates  issued  in  this  City  dur- 
ing that  period,  including  substitutions,  the  total  of  which 
was  $453,000,000,  $330,000,000,  or  72.92%  consisted  of 
Commercial  Paper,  and  $123,000,000  or  27.08%  was  made 
up  of  stocks,  bonds  and  short  time  railroad  and  other  simi- 
lar notes.  This  being  the  case,  an  Emergency  Currency 
of  the  character  I  have  mentioned  would  certainly  seem  to 
meet  the  requirements  of  the  mercantile  community. 

In  practical  operation  the  scheme  would  work  some- 
thing like  this:  A  merchant  would  borrow  from  his  bank, 
say,  $200,000  on  his  single  name  paper.  The  bank  would 
give  him  credit  on  its  books  for  that  amount,  less  the  dis- 
count, upon  which  he  would  be  at  liberty  to  draw  through 
the  Clearing  House.  His  bank  could  take  this  paper  to 
the  Clearing  House  and  receive  therefor  Clearing  House 
Loan  Certificates  to  the  amount  of  $150,000,  the  New 
York  Clearing  House,  for  instance,  requiring  a  margin  of 
33^%  on  its  certificates.  Upon  notification  by  the  mer- 
chant that  he  would  need  money  for  his  pay  rolls,  his  bank 
could  provide  for  his  wants  in  this  respect  by  requesting 
the  Clearing  House  Association  to  deposit  the  $150,000 
of  certificates  with  the  Sub-Treasury  and  receive  therefor 
$75,000  in  Emergency  Currency,  which  in  turn  could  be 
handed  to  the  merchant  for  his  use.  This  same  method 
could  be  pursued  with  all  borrowers  who  needed  assistance 
whether  merchants  or  bankers. 

In  times  of  very  active  money,  and  in  panicky  periods, 

[Page  30] 


Clearing  House  Loan  Certifibates 

both  bankers  and  merchants  are  willing  to  pay  a  higher 
rate  of  interest  to  take  care  of  their  obligations,  but  as 
soon  as  the  stress  and  storm  are  over,  and  money  returns 
to  its  customary  channels,  lawful  money  could  be  de- 
posited with  the  Sub-Treasury  and  the  Emergency  Cur- 
rency retired.  In  the  meantime  the  merchant's  collections 
would  be  made,  his  paper  taken  up  at  maturity,  and  the 
currency  would  thus  have  served  the  purpose  for  which  it 
was  created. 

This  would  seem  to  me  to  provide  a  safe  Emergency 
Circulation,  having  behind  it,  first:  the  credit  of  the  indi- 
vidual institution  and  its  collateral,  as  passed  upon  by  a 
committee  of  bank  officers,  second:  the  fact  that  a  large 
margin  of  collateral  is  required  before  the  certificates  are 
issued,  third:  the  circumstance  that  the  bank  members  of 
associations  by  which  certificates  are  issued  agree  among 
themselves  to  assume  their  pro  rata  share  of  any  losses  that 
may  occur  through  their  issuance,  which  practically 
means  that  all  the  assets  of  all  the  bank  members  of  the 
Clearing  House  Association  are  pledged  to  the  payment 
of  the  certificates  it  issues,  fourth:  the  fact  that  the  Gov- 
ernment is  asked  to  advance  only  50%  of  the  face  value 
of  these  certificates,  and  fifth:  the  certainty  of  the  prompt 
retirement  of  the  Emergency  Currency  with  lawful  money 
of  the  United  States. 


[Page  31] 


NTA 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 


AN     INITIAL     FINE     OF     25     CENTS 

WILL  BE  ASSESSED  FOR  FAILURE  TO  RETURN 
THIS  BOOK  ON  THE  DATE  DUE.  THE  PENALTY 
WILL  INCREASE  TO  50  CENTS  ON  THE  FOURTH 
DAY  AND  TO  $1.00  ON  THE  SEVENTH  DAY 
OVERDUE. 


MAR  24  1933 


APR    11  1933 


APR  22 


1938 


ocr9 


1B40  M 


GAYLORD    BROS. 

MAKERS 

SYRACUSE,  -  N.Y, 

PAT.  JAN.  21,  I8O8 


t  <mr 


*& 


